In the first phase of the trial, Gibbs & Bruns defended St. James Capital Corporation and SJMB LLC in an eight-week jury trial emerging with a complete defense verdict. Plaintiffs asked for $47 million in alleged actual damages, approximately $50 million in disgorgement, and $60 million in punitive damages. Plaintiffs were poured out on all claims. In addition, just prior to the trial date in the second phase of the case, the matter settled with a counterclaim recovery for our clients in excess of $11 million and zero recovery to the plaintiffs. The following is a detailed summary:
Between 1996 and 2005, Defendant St. James Capital Corporation (SJCC) acted as the general partner of St. James Capital Partners, LP (SJCP). The SJCP partnership was an investment fund in which limited partners pooled resources and the general partner made the investment decisions. The primary purpose of SJCP was to invest in bridge loans, short-term convertible debt, and equity. The initial capital raised from the limited partners totaled approximately $23 million.
In 2005, SJCC resigned as general partner of SJCP and was replaced by Overcup Capital, L.L.C. On behalf of SJCP, Overcup brought direct actions against SJCC and others alleging breach of fiduciary duty and breach of contract. Defendants asserted counterclaims against Overcup and its principal for breach of the Partnership Agreement and breach of fiduciary duties.
Beginning in 1998, a second fund was created that mirrored the approach of SJCP. This second fund was called St. James Merchant Bankers, LP (SJMB). The general partner of SJMB was Defendant SJMB LLC. The initial capital raised from the limited partners totaled approximately $43 million. Fourteen limited partners brought a derivative suit, on behalf of SJMB, against SJMB LLC and others alleging numerous breaches of fiduciary duty and breach of contract.
Plaintiffs asserted claims of breach of fiduciary duty for fourteen separate transactions. After six weeks of pretrial and eight weeks of actual trial, the jury found no breach of fiduciary duty or breach of contract on all claims. In addition, the jury made a separate finding that each of the transactions was “entirely fair.” Plaintiffs lost on all of their claims.
Separately, Defendants prevailed entirely on their counterclaims. The court found, as a matter of law, that Counter-Defendants Overcup and its pricipal violated the Delaware partnership agreement at issue by wrongfully witholding $6 million owed to the Defendants/Counter-Plaintiffs. The jury found that Overcup and its principal had breached their fiduciary duties with malice and awarded punitive damages.
In November 2008, the second phase of the case was set to be tried before the same jury. Prior to that trial date, the case settled with a counterclaim recovery for our clients in excess of $11 million and zero recovery to the plaintiffs.